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Earth First Recycling Case Study

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Creditors Relief is assisting Earth First Recycling with their financial situation. It has come to the attention of Randy Tigar and Earth First Recycling that Pearl Beta Funding, LLC, represented by MCA Servicing and Steven Berkovitch, Esq., sent a UCC Lien Notice. As a result, Paychex is withholding funds designated of the payment of taxes.

First, if Paychex does not release the funds immediately, it will be deemed a breach of the agreement between Paychex and Earth First Recycling.

Second, the Uniform Commercial Code § 9-109 controls the scope of all security interests. Under § 9-109(c)(1), an article does not apply when it is preempted by a statute. 26 U.S.C. § 7501 states that “any person […] required to collect or withhold any internal revenue tax from any other person and to pay over such tax to the United States, the amount of tax so collected or withheld shall be held to be a special fund in trust for the United States.” In Begier v. IRS, 496 U.S. 53 (1990), the Supreme Court held that those funds are held in a statutory trust until the “specific funds are […] sent to the …show more content…

Paychex does not hold funds for Earth First Recycling. The funds held by Paychex are earmarked for employee’s payroll and for the payment of state and federal taxes. As such, Paychex isn’t in the possession, custody, or control of any Earth First Recycling funds. Further, Pearl states that Earth First Recycling granted a limited power-of-attorney pursuant to the agreement, which was attached to the notice. The notice quotes the limited power-of-attorney clause with a reference to paragraph 1.10. Looking to the agreement attached, paragraph 1.10 is entitled “Sale of Receipts” and doesn’t include any limited power-of-attorney language. Lastly, the power-of-attorney is void in this circumstance because Earth First Recycling is unable to request the funds back from Paychex, when it’s already designated for the payment of

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